Which One of the Following Is the Reason That Macaulay

question 19

Multiple Choice

Which one of the following is the reason that Macaulay duration is NOT a good measure of interest rate risk for mortgage bonds?

• A)Mortgage bonds are long-term securities while Macaulay duration is a short-term measure.
• B)Macaulay duration assumes the debt has a variable rate and most mortgages have a fixed rate.
• C)Macaulay duration requires bond payments to be made semiannually.
• D)Macaulay duration assumes payments are fixed and mortgage bond payments vary.
• E)Macaulay duration only applies to zero coupon bonds.

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Definitions:

Labor Market

The supply and demand for labor, where employers find employees and individuals find jobs.

Compensating Differentials

Variation in wages that arises to offset the desirability or undesirability of a job or the costs and benefits of working in different locations.

Less Pleasant

A subjective assessment indicating that something is not as enjoyable or agreeable as other options or experiences.

Compensating Differentials

Wage differences across jobs that reflect the desirable or undesirable aspects of different jobs, aiming to compensate workers for job attributes like risk or undesirable hours.